The Real Costs of Unemployment

The Real Costs of Unemployment by ShareLove.Fund’s Rainbow Women Social Enterprise endeavor and sponsored by your generous donations.

There can be absolutely no doubt that unemployment is unwanted in every part of the globe. We can see the impact it has had on the US alone where 10 million people lost their jobs in the wake of the Covid-19 pandemic. Although some economists make the claim that a certain percentage of unemployment is inevitable, this level of unemployment costs everyone from the government to the individual.

The most commonly discussed costs to the government are the costs involved in boosting social programs. However, there are additional costs that aren’t discussed quite as widely. Let’s take a look at some of them.

Costs to the Individual – These are easy costs to imagine. One of the first aspects of a person’s life to be affected is their standard of living. Even people who qualify for government benefits often find that the benefits replace less than 50 percent of their regular income. Naturally, their rate of consumption also goes down. It doesn’t stop here though. People often turn to their savings to pull them through and end up emptying their savings accounts.

There is another aspect to be considered here and that is the question of skill. The longer the unemployment lasts, the more the skills erode. This means that a whole lot of useful talent is lost to the economy. On top of that, unemployment means that members of a family may decide not to pursue further education, meaning that a lot of potential skill doesn’t find its way into the economy either.

Then there is the aspect of mental health. The uncertainty and enforced idleness that unemployment brings with it can take a toll on the mental health of workers which in turn can affect physical health and, in some cases, even lead to shorter lifespans.

Costs to Society –These are costs that are a bit more difficult to calculate but they are very real. As unemployment spreads, societies tend to become more insular. Calls for immigration halts and protectionism increase which can lead to trade wars and lowered economic well-being. It doesn’t stop there. Social tensions increase with crime going up and fewer people engaging in volunteering activities, as per various studies. It’s easy to understand that people who don’t have a source of income turn to crime to meet their economic needs.

Costs to the Country –  The impact of unemployment can clearly be seen at a national level. There is the most obvious aspect that we discussed earlier – higher payments through government programs at the state and federal level. There is a flip side to this coin. While the spending increases, for the government the income decreases. In other words, neither federal nor state governments are collecting those taxes which means they have to borrow money increasing their debt.

Although inflation is a serious issue, unemployment cannot be ignored either. The more uncertain the future, the less inclined workers are to investing in it – either in the form of skill development or in the form of building their savings.